This latest report is in response to a Congressional directive that the Inspector General review the steps DHS has taken to comply with recommendations contained in the Inspector General's January 2005 report on the program. That report made 12 recommendations to address issues involving the strategic direction of the program, the evaluation and selection of grant awards, funding private sector projects, the status of funds, and the dichotomy between two approaches DHS used to fund projects in the second round.

DHS implemented the recommendations in time to improve the administration and effectiveness of the fifth and most recent round of port security grants, which totaled $142 million for 132 projects. DHS reshaped the program to make it more strategic and more risk-based by: (1) directing funds to the nation's 66 highest risk ports using a risk-based formula and tiering process; (2) modifying eligibility criteria; (3) instituting a new funding allocation model; and, (4) implementing a complex scoring methodology to process and rank the results of the field and national reviews as well as relative risk reduction data with more precision. The Office of Infrastructure Protection (IP) became actively involved in the program through its development of the risk-based formula, thereby filling an important and much needed role. Grantees reduced the outstanding balance of unspent funds from the first three rounds by more than $190 million since the OIG's last report.

Despite these positive developments, says the latest report, "DHS has not entirely eliminated the issues that led to our recommendations."

The revised selection and evaluation process ranks all of the projects, but does not include a minimum score threshold to differentiate unworthy projects from worthy ones. What the actual scores imply about the merits of projects, especially the funded projects, is discounted.

"We identified 20 projects that reviewers determined did not meet national security priorities but were funded nonetheless," says the report,which notes that "the program also skipped over higher ranked projects to fund projects that it could fully fund." And "a handful of awarded projects reflected incomplete scores or data."

"Field reviewers' perceptions about projects, as reflected in their scores and rankings, suggest that they still have widely varying opinions about how well projects are satisfying program criteria," says the report.

The report says that "although DHS clarified its policy on funding private sector projects, this policy falls short of addressing the prudence of funding certain projects.

The OIG says that its work on the present report "suggests that there are additional actions that DHS should take to improve the administration and effectiveness of the port security program." It is recommending that the Under Secretary for Preparedness:

1. Establish a minimum score threshold under the new selection and evaluation process that projects must meet. Funding in the top three tiers not used as a result of implementing this minimum threshold should be reallocated to a lower tier;

2. Modify the Grants Management System (GMS) or the National Review Panel (NRP) internal database to require NRP members to enter a reason for adjusting a field review score;

3. Seek more consistent scoring by field reviewers;

4. Conduct a "pre-audit" of proposed grant award decisions; and,

5. Require private sector applicants to demonstrate how a federal grant would enhance their own security investments as a condition to receiving a grant.